How do companies without HR specialist get on?

By Ekaterina Ovchinnik, HR Director at Intercomp

The first HR department is believed to have been set up by the American company National Cash Register (NCR) in 1901 on the back of a hard-fought strike. The purpose of this new department was to monitor adherence to workers’ rights, and it mainly focused on accounting, payroll, work safety, and employee complaints. 

Екатерина Овчинник, директор по персоналу Интеркомп
Ekaterina Ovchinnik
HR Director

More than a hundred years later, some companies still perceive their HR department (or rather, to be honest, Staff Division) in the same way and consider that its functions are to hire and handle formalities with staff, record personnel events (vacation, sick leave, etc.), comply with statutory requirements, and possibly also organize corporate events and anniversary celebrations. All these tasks, although important, are not for most businesses their main focus even now. Many do without HR specialists and outsource these tasks. As Peter Drucker said already in the early 1990s: “Do what you do best and outsource the rest”.

Naturally, a lot depends on the industry, business specifics, management style, company size, as well as the needs of staff and executives.

It does not make sense for small newly-established companies with still only a few HR events or small staff turnover to hire an HR specialist. In this case, HR functions are usually allocated to administrative staff, accountants and managers who end up fulfilling them. Alternatively, many companies engage recruitment agencies to perform these functions. Accountants take on payroll and keep HR records, while administrative staff often organizes corporate events, and managers recruit and assess staff. In other words, in such companies some employees fulfill two functions at once.

Another example is when companies go for a flat management structure, often claiming that traditional HR departments take over all processes from hiring to dismissal, tie up business to ineffective policies and processes, hire staff but are unable to assess their professional skills, and overall preclude innovations. In such companies, interviews are very often conducted directly with future managers. Businesses built by a team of like-minded people at their inception may experience righteous outrage at the idea of hiring an HR manager and fiercely argue against the creation of such post and its role.

But, as they grow, many organizations reconsider their position on HR functions. According to one of the latest surveys of the Gallup Institute, one of the most authoritative sources of information about the status of public opinion in the world, HR specialists fulfill a “vital and essential role” and under certain conditions can improve work quality for staff by 33%.

A particular HR resource is required at each stage of a company’s life cycle. It is important to understand whether a recruiter, an HR officer, or an HRD manager is needed. There are, of course, some HR specialists who do it all, but very few, and their qualification in one or several areas do not, as a rule, meet all expectations. HR officers keep personnel records in accordance the requirements of Russian law: they handle the formalities for employment of staff, maintain personnel files and, most importantly, pass on data for payroll calculations. Recruiters specialize in the selection of staff, while HRD managers handle high-level tasks. They, for instance, devise incentive scheme and staff development programs, are involved in their company’s strategic initiatives, etc. A proper understanding of the HR functions that need to be covered and how they can be covered here and now saves time and money and is also key to further successful development of HR departments and companies as a whole.

Big businesses are another story altogether. Large companies usually have an HR department. Due to their sheer size, it is not possible to combine positions in large companies so these companies tend to optimize some of their HR functions through external contractors as well as outsourcing and/or consulting services.

According to RAEX latest survey, the market of consulting services showed in 2017 record growth over the past 10 years, and HR management services grew the fastest. The total revenue derived from this segment by consulting companies increased in 2017 by 53% to reach RUB 1.651 billion. Analysts have noted that on-site and remote staff appraisal, staff training, HR analytics and automation of HR management processes are among the most popular HR services provided to companies.

Companies strive to improve performance not only thanks to well-defined processes, but also thanks to the introduction of new technologies and digitalization. Nowadays, new publications about innovative technologies handling many HR tasks better and better (from interviews to talent management) are released every day. Due to the high rate of change and need to constantly adapt to changing conditions, companies have to replace the traditional hierarchical structure with a network of teams with broad powers. As routine operations are increasingly automated, robotized and/or outsourced, project and change management issues come to the fore. And who will manage these changes? Top managers or HRD? Each company chooses differently. The most important is not to stand still and shut out the inevitability of change.